Economists not convinced govt can afford R36bn economic support package

The R36 billion economic support package that President Cyril Ramaphosa announced on Sunday night and fleshed out by Finance Minister Tito Mboweni on Wednesday did not really please economists, although it will help small and medium businesses to get on their feet again.

While treasury director-general, Dondo Mogajane, emphasised that government will not borrow money to fund the package, economists were not convinced.

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Economist Mike Schüssler says although government wants to change how money is spent to fund the package, he is worried about long-term aspects such as the R350 relief grant.

“When it comes to an end, people will say that they depend on it and need it.”

He says it is time for government to start spending where it can get more bang for its buck.

“We must look at where we can spend money more efficiently and how can we spend to grow the economy.”

Schüssler warned that the country will get to a point where it will have twice as many people receiving grants than people working. He says it is time to change the rules, such as when the president announced that entities will be able to generate up to 100MW of electricity without a license.

“We cannot spend our way out of this,” he says.

Prof. Jannie Rossouw from the Wits Business School is also not impressed with the explanation of where the money will come from.

“The figures were not clear, but it looks like treasury believes that they will be able to raise the R36 billion. Government has no money. It only has debt.”

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Tom Stuart, chief marketing officer for SME service provider Lulalend, is more optimistic, saying that the president’s announcement on Sunday night shows that he understands the importance and value of the SME sector and the part it plays in driving the economy of South Africa.

“It is a welcome step towards getting this sector that creates over 90% of private sector jobs, on its feet again. The tax incentives he announced will also encourage employers, especially in the retail and hospitality sector, to create or maintain jobs.”

He says SME owners should now make sure that they do everything they can to secure their cash flow to position themselves for growth and recovery, as well as use of any of the support measures that have been put in place.